Understanding Technical Analysis

Technical analysis is the study of the price movement and patterns of a security. By scrutinizing a security's past price action, primarily through charts and indicators, traders can forecast future price direction.

Frequently Asked Questions
  • What is technical analysis?

    Technical analysis is an investing method that is used to evaluate investments and identify trading opportunities in price trends and patterns by using charts. By tracking price and trading volume, investors can recognize patterns that help them guide their trading decisions.

  • What is a line graph?

    A line graph connects various data points to show specific patterns over a defined time horizon of interest for an investor, and can also be known as a line plot or line chart. For investors, the data is used to create a visual representation of a company’s historical stock price moves.

  • What is an average return?

    An average return is a measure or indicator that helps investors and analysts gauge what the returns for a particular stock or security has been over a set period of time. In sum, it is the average return calculated over a time period of interest to the investor.

  • How do you build a trading indicator?

    Trading indicators are tools that an investor can use to help gauge future performance of a stock or security. Two of the most common parts of an indicator are to build a unique indicator to uses patterns and common chart patterns to recognize trends, and to use mathematical functions to predict future support and resistance levels of stock prices.

  • What is relative strength?

    Relative strength involves selecting investments that have been outperforming the market and is used by technical analysts and value investors to inform their investing decisions. Relative strength investors generally believe that the trend of outperformance will continue, which is why they are sometimes referred to as momentum investors.

  • What is a hockey stick chart?

    In trading circles, a hockey stock chart is a price line chart that looks like a hockey stock, which depicts a sharp rise in prices after a short period of stability. As one can guess, this is illustrated by a chart that looks like a hockey stick with a short, curved blade, attached to a long stick that rises at an angle.

Key Terms
Portfolio
Average Return Definition
Hand of a Stockbroker Buying and Selling Shares Online
Market Indicators That Reflect Volatility in the Stock Market
Man Working on Construction Plan at Desk
How to Build a Trading Indicator
Technical Indicator Definition
What Technical Tools Can I Use to Measure Momentum?
Wood Textured Graph Bars
Understanding T Distribution
Midsection Businessmen Analyzing Charts On Laptop In Office
Advanced Candlestick Patterns
Relative Strength
Comparing Simple Moving Average and Exponential Moving Average
Using Technical Indicators to Develop Trading Strategies
Divergence vs. Convergence What's the Difference?
Stock chart price pattern rebound
Ulcer Index (UI) Definition
Economy
Strategies for Trading Fibonacci Retracements
Value Added Monthly Index (VAMI)
What Does Platykurtic Mean?
Share price data from investors portfolio on a laptop computer screen
DUAL Commodity Channel Index (DCCI)
Can I Use the Correlation Coefficient to Predict Stock Market Returns?
Inexperienced Foreign Exchange Trader Scratching Head
Tackling Technicals for Beginners
How to Use Trend Analysis
The Pioneers of Technical Analysis
Anticipate Trends to Find Profits
Technical Analysis That Indicates Market Psychology
Bar Graph Definition and Examples
New York Stock Exchange Entrance at Wall Street Lower Manhattan
The Top Technical Indicators for Commodity Investing
A Stock Sell-Off Vocabulary Guide
Paleoclimate reconstruction
Hockey Stick Chart
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Technical Analysis of Stocks and Trends
Line Graph Definition
A hand pressing icons separated by lines
What Is a Price Channel?
Horizontal Line Definition and Example
Close-up of a street-level electronic stock screen on the side of a building at night.
McGinley Dynamic Indicator
Adapt The 50-Day EMA To Enhance Your Trading
Average Directional Index (ADX) Definition and Uses
What Is a Bollinger Band® in Technical Analysis?
Paper Trade: Practice Trading Without the Risk of Losing Your Money
Using Bullish Candlestick Patterns To Buy Stocks
Fibonacci and the Golden Ratio: Technical Analysis to Unlock Markets
New York Stock Exchange Announces Merger With Deutsche Borse
Notional Value vs. Market Value: What's the Difference?
Exponential Moving Average (EMAV)
How Is the Exponential Moving Average (EMA) Formula Calculated?
Arithmetic Mean Definition
Average True Range (ATR)
Bullish Engulfing Pattern
Candlestick
Exponential Moving Average (EMA)
Fibonacci Retracement Levels Definition
What Is the Head and Shoulders Pattern?
Ichimoku Cloud Definition and Uses
MACD Indicator Explained With Formula, Examples, and Limitations
stock market
Moving Average (MA): Purpose, Uses, and Examples
On-Balance Volume (OBV)
Relative Strength Index (RSI) Indicator Explained With Formula
Simple Moving Average (SMA)
Stochastic Oscillator
What Is a Trendline in Trading?
Support and Resistance Basics
Arms Index (TRIN) Definition and Application
What Is a Bear Trap in the Stock Market?
Capitulation
A screenshot of Cat-Bounce.com.
Dead Cat Bounce
What Is a Stock Exchange?
What Is a Death Cross?